Rift Valley Railways

Rift Valley Railways (RVR) is a consortium that was established to manage the parastatal railways of Kenya and Uganda. The consortium won the bid for private management of the century-old Uganda Railway in 2005. The Kenya-Uganda railway had been run by the East African Railways and Harbours Corporation 1948–77. In 2014, RVR moved 1,334 million net tonne kilometers of rail freight, up from 1,185 million net tonne kilometers the previous year.[3]

Rift Valley Railways
TypePrivate consortium
IndustryTransportation
Founded2005 (2005)
HeadquartersNairobi, Kenya
Key people
Titus Naikuni[1]
Chairman
Carlos Andrade[2]
Group CEO
Bong Yoon
Chief Financial Officer
ServicesRailway systems
Revenue$84.2 million[3] (FY 2014)
$11.3 million[3] (FY 2014)
Number of employees
2100 (2014)
Websitewww.riftvalleyrail.com

History

The railway line, derided as the "Lunatic Line" by a critical British press during its construction[4] and still referred to colloquially as the "Lunatic Express", runs about 900 kilometres (560 mi) from Kenya's Indian Ocean port of Mombasa, through Nairobi, and up the Rift Valley to Kisumu on the shores of Lake Victoria.

Another leg of the same railway system traverses the Great Rift Valley, through the town of Eldoret in Kenya, entering Uganda at Malaba and passing through Tororo and Jinja to enter Kampala, Uganda's capital. From there, the railway continues to Kasese in the Western Region of Uganda close to the border with the Democratic Republic of the Congo, approximately 1,600 kilometres (990 mi) north-west of Mombasa. At Tororo, the northern leg of the Ugandan railway system branches off and travels north-westwards through Mbale, Soroti, and Lira to the city of Gulu, the largest metropolitan area in the Northern Region of Uganda. From Gulu, the line continues west to end in Pakwach on the banks of the Albert Nile, approximately 1,500 kilometres (930 mi) north-west of Mombasa.

Original shareholding

Originally, RVR was led by Sheltam Rail Corporation of Sheltam Trade Close Corporation (STCC) of South Africa that had experience with managing other African railways. Minor partners of the consortium were Kenya's Prime Fuels (15 percent), Mirambo Holdings of Tanzania (10 percent), and Comazar (10 percent) and the CDIO Institute for Africa Development Trust (4 percent), both of South Africa. The consortium planned to invest in the railway system, upgrade it, reduce inefficiencies, use a smaller work force, and generate an annual concession fee of 11.1 percent in each country. In addition, it would have paid US$1 million annually for the passenger service concession in Kenya and $500,000 annually to Uganda for the same reason.

On 28 July 2006, the East African Standard reported that the take-over, originally planned for 1 August 2006, was postponed to 1 November 2006. This take-over happened in November and was scheduled to last 25 years.[5] The 2007–2008 Kenyan crisis included destructive riots that blocked and partly destroyed the rail system between Kenya and Uganda leading to difficulties in supply. Further destruction and loss of income led to significant financial losses.[6]

On 9 October 2008, Toll Holdings of Australia announced that it had entered into a contract to manage the Kenya-Uganda railway, replacing the management of RVR. The consortium had been criticized for falling freight traffic in the two years since taking control, while the consortium alleged that the drop resulted from the poor condition of the railway infrastructure and the damage done by protesters during the 2007–2008 Kenyan crisis. Officers from Toll subsidiary Patrick Defence Logistics will manage the railway after the transition.[7]

In February 2010, the East African Community announced plans to raise capital to "upgrade and expand the existing railway network to boost the region’s competitiveness". In a related development, the Egyptian investment company Citadel Capital bought a 49 percent stake in Sheltam Railway Company of South Africa, the lead investor in the RVR consortium.[8] During the first quarter of 2010, Trans-Century filed an unsuccessful lawsuit in Mauritius, where RVR is incorporated, in an attempt to block Citadel Capital's entry into the consortium.[9]

Press reports from East Africa in 2010 indicated that Charles Mbire, a wealthy Ugandan entrepreneur who represents Uganda on the RVR board of directors, had expressed interest in purchasing the 15 percent shareholding that should be reserved for Ugandans in the RVR consortium.[10]

Current shareholding

In March 2010, the RVR shareholders met in London, under binding arbitration. Following those talks, the new shareholding in RVR was Africa Railways Limited (ARL) 51 percent, TransCentury of Kenya 34 percent, and Bomi Holdings of Uganda] 15 percent.

ARL is a subsidiary of Citadel Capital, an Egyptian private equity firm.[11]

TransCentury Limited is a private Kenyan investment company, whose shares are listed on the Nairobi Stock Exchange.[12]

Bomi Holdings Limited is a Ugandan investment company owned by Charles Mbire.[13]

The revised shareholding agreement was signed in Kampala, Uganda's capital city on 25 August 2010.[14] The new owners pledged to invest US$250 million in the consortium to revitalize the railway network.[15][16]

In March 2014, Trans-Century Limited divested from RVR by selling their 34 percent ownership interest to Africa Railways for an estimated US$43.7 million.[17]

Citadel Capital has since re-branded as Qalaa Holdings.[18]

Rift Valley Railways Stock Ownership At December 2014
RankName of OwnerPercentage Ownership
1Qalaa Holdings of Egypt30
2Bomi Holdings Limited of Uganda[19]15
3Other Institutions55
Total100

Partnerships

In November 2010, RVR signed a technical and management agreement with América Latina Logística (ALL), based in Curitiba, Brazil. The firm is the largest independent company of its kind in Latin America. It has operations in Argentina and Brazil, where it oversaw the successful privatization of the national railway system. ALL will provide RVR with key management and operational staff and will oversee the transfer of technology, including selection and sourcing of raw material and information technology software and hardware. The initial partnership is for a renewable term of five years, starting in November 2010.[20]

New financing

In March 2011, media reports indicated the RVR intended to raise US$240 million to fund its expansion plans over the next five years. US$140 million will be raised by capital injection by the three corporate investors. The remaining US$100 will be borrowed from commercial banks. RVR already has a credit line estimated at about US$54 million.[21]

In July 2011, RVR secured a US$40 million loan from the African Development Bank to finance its improvements and expansion.

In the same month, RVR reported a positive EBITDA (earnings before interest, taxes, depreciation and amortization) for the year ending 30 June 2011. This marked the first positive annual EBITDA since African Railways acquired a 51 percent stake in RVR, in late 2009.[22]

In August 2011, East Africa media outlets reported that RVR had secured a US$164 million long-term loan from a consortium of six international financial institutions, which included the International Finance Corporation, KfW, the Equity Bank Group, and the Dutch Development Bank .[23] Another US$80 million will be raised by the shareholders. The difference will be realized from internally generated profits. The total amount needed over the next five years has been revised to US$287 million.[24]

Future investments

In August 2011, media outlets in East Africa reported that RVR was interested in financing and building the railway line linking Juba, the capital of South Sudan, to the industrial town of Tororo in the Eastern Region of Uganda at the international border between Uganda and Kenya, a distance of approximately 700 kilometres (435 mi), through Gulu and Nimule. The decision to proceed with this project would require approval from all partners in the RVR consortium and from the governments of Uganda and South Sudan.[25] With new investments, RVR anticipates to cut the transit time for goods between Mombasa and Kampala to seven days from the current twenty-one.

In March 2015, RVR stated that it had met the terms agreed with the Kenya and Uganda governments in May 2014, thereby avoiding cancellation of its licence[26]

New developments

In December 2010, RVR announced plans to increase freight volumes by 350% in the next year through improved infrastructure, in particular upgrading old rails.[27] In September 2012, RVR began a major renovation of its locomotive overhaul facility in Nalukolongo, a suburb of Kampala. During the same month, RVR commission a refurbished ferry connecting Port Bell in Uganda to Mwanza in Tanzania and promised to commission a second vessel on the same route before the end of 2012.[28]

On the line to the South Sudan frontier, the consortium expected to open the Tororo to Pakwach section to traffic in December 2012.[29] However, this ambitious time schedule could not be fulfilled. The line northwest from Tororo towards Pakwach was cleared of vegetation and structures were repaired. The first commercial train in 20 years ran through on the metre gauge railway from the Kenyan port Mombasa to the Ugandan town of Tororo and onwards to Gulu on September 14, 2013.[30] In October 2013 the Tororo-Gulu-Pakwach line was officially commissioned by the Ugandan head-of-state.[31] Meanwhile, a plan for a Chinese-built line from Nairobi to Mombasa with open access would see RVR competing for business with other operators, which may lead to another legal battle.[32] In July 2014, RVR received US$70 million in loan disbursement from a consortium of international financing agencies, as part of the US$287 million financing plan for the period 2011 - 2016.[33] RVR will use some of the funds to establish passenger commuter service in Kampala, in collaboration with Kampala Capital City Authority.[34] In February 2015, Rift Valley Railways Consortium, in collaboration with Kampala Capital City Authority, began testing commuter passenger railway service in Kampala and its suburbs, with a view to establish regular scheduled service beginning in March 2015.[35]

Termination of contract with Kenya

In July 2017, the government of Kenya terminated the 25-year contract that it signed with the Rift Valley Railways Consortium to run its metre-gauge line to Uganda. The operations of the railway in Kenya reverted to the Kenya Railways Corporation. The concession began on 23 January 2006 and had been planned to last 25 years.[36]

Termination of contract with Uganda

In June 2017, the Uganda government issued a 90-day notice to RVR, notifying the concession of Uganda's intention to terminate the concession. 4 September 2017 is the expected termination date. Uganda Railways Corporation is expected to resume operations, as before the concession was awarded.[37]

See also

References
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  2. "Group Chief Executive Officer". Rift Valley Railways Consortium. Archived from the original on 22 June 2013. Retrieved 4 June 2015.
  3. QH. "Qalaa Holdings Annual Report for Year Ending 31 December 2014" (PDF). Qalaa Holdings (QH). Retrieved 4 June 2015.
  4. "Aboard the Lunatic Express by Linda Watanabe McFerrin". Retrieved 16 July 2007.
  5. Njoka, Kimathi (28 July 2006). "East Africa: Kenya And Uganda Railways Takeover Date Postponed". East African Standard (Nairobi). Retrieved 5 May 2014.
  6. Ahabwe, Albert (11 February 2008). "Kenya: Railway Transport Also Paralysed". East African Business Week (Kampala). Retrieved 5 May 2014.
  7. Speedy, Blair (10 October 2008). "Toll to manage Kenya-Uganda railway". The Australian. Archived from the original on 12 October 2008. Retrieved 11 October 2008.
  8. Kisero, Jaindi (15 February 2010). "Inside The Hostile Takeover of RVR". The EastAfrican. Nairobi. Retrieved 19 December 2015.
  9. Kisero, Jaindi (6 January 2010). "Egyptians Outwit TransCentury In Bid To Control Railways Firm". Daily Nation via Railpage.com.au. Retrieved 5 May 2014.
  10. Wakabi, Michael (15 February 2010). "Ugandan Millionaire Bids for A Stake As Boardroom Control War Intensifies". Retrieved 5 May 2014.
  11. Nation, Reporter (20 July 2011). "Rift Valley Railways Investments Secures AfDB Loan". Daily Nation. Retrieved 5 April 2014.
  12. Ngigi, George (15 May 2015). "TransCentury's big owners lose Sh5bn in share price fall". Business Daily Africa. Nairobi. Retrieved 16 August 2017.
  13. Ogwang, Joel (2013). "RVR Raises $287 Million To Revive Uganda-Kenya Railway Service". New Vision. Kampala. Archived from the original on 6 May 2014. Retrieved 5 May 2014.
  14. Monitor, Reporter (26 August 2010). "Railway Deal Signed". Daily Monitor. Retrieved 5 May 2014.
  15. McGregor, Sarah (23 March 2010). "Kenya-Uganda Rail Network to Get $250 Million Upgrade". Bloomberg News. Retrieved 5 May 2014.
  16. "Citadel Capital's Rift Valley Railways Boost Ugandan Economy with The Opening of Key Trade Route Between Kenya & North Uganda". Citadel Capital. Archived from the original on 6 May 2014. Retrieved 5 May 2014.
  17. Musisi, Frederic (3 April 2014). "Citadel Capital Gains More RVR Stake". Daily Monitor. Retrieved 5 May 2014.
  18. By, Agencies (19 August 2014). "Egypt's Qalaa Pumps UShs63 Billion In Rift Valley Railways". Daily Monitor (Kampala). Retrieved 19 August 2014.
  19. "Citadel Completes Rift Valley Railways Restructuring". Daily News Egypt via Zawya.com. 27 August 2010. Retrieved 5 May 2014.
  20. Wahome, Mwaniki (3 November 2010). "Kenya: Brazilian Firm to Manage RVRI". Daily Nation. Archived from the original on 1 July 2012. Retrieved 5 May 2014.
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  25. Odhiambo, Allan (5 August 2011). "RVR Targets Planned Uganda-Sudan Railway Line". Business Daily Africa. Retrieved 5 May 2014.
  26. Andae, Gerald (10 March 2015). "RVR Escapes Licence Revocation With Higher Rail Cargo Volumes". Business Daily Africa (Nairobi). Retrieved 10 March 2015.
  27. In, Uganda (10 July 2013). "Track Improvements Speed Up Rift Valley". Railways Africa. Retrieved 5 May 2014.
  28. Asiimwe, Dicta (8 September 2012). "Upgrade Plan for Kenya-Uganda Railway". The EastAfrican. Nairobi. Retrieved 5 May 2014.
  29. Kalungi, Nicholas (25 July 2012). "RVR To Cut Mombasa-Kampala Transit Days From Fourteen to Seven". Daily Monitor. Kampala. Retrieved 5 May 2014.
  30. Uganda's Northern Line Revived, Railway Gazette International retrieved October 09, 2013.
  31. Makumbi, Cissy (23 October 2013). "Museveni Opens Gulu Railway Line". Daily Monitor. Retrieved 5 May 2014.
  32. Kisero, Jaindi (22 September 2012). "Kenya, China Quietly Strike Deal On Modern Railway Line". The EastAfrican. Retrieved 5 May 2014.
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  35. Paul Tajuba, and Farahani Mukisa (5 February 2015). "KCCA Tests Passenger Train". Daily Monitor. Kampala. Retrieved 5 February 2015.
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